Abstract

Manufacturing exhibits nonlinear trends in production levels, one being an active state and the other a passive state. We use a Markov model to estimate these two states, which are tied to United States imports of Mexican products. A regression is made in order to estimate whether there is an expansion or contraction in order to show which sectors have a greater propensity to expand or to decrease, there are several cases where the contracting level of output lasts longer than the expansionary alternative. This method of analysis can be applied to any Latin American economy.